Toys ‘R Us – Can the third time possibly be a charm?

Toys ‘R Us is akin to the game of Wack-A-Mole over the past 5 years – every time one iteration of the fabled toy concept shuts down, another rises to take its place. The original Toys ‘R Us declared bankruptcy in 2017 and 2018, with the decline of the concept attributable to a number of factors (tired store prototypes, challenges in paying rent when most of the store’s sales were generated during the Christmas holiday season, and increased competition from Walmart, Target and Amazon, among others). The concept bounced back with two smaller, mall-based concepts in late 2019 (Garden State Plaza in New Jersey and Houston Galleria in Texas), but the stores were shuttered shortly after opening. The COVID-19 pandemic certainly contributed to their demise, but it’s not clear that the concept would have survived regardless.

Now the latest Toys ‘R Us resurgence has emerged – opening 1,000 – 10,000 square foot toy departments inside Macy’s stores, with the goal of having a Toys ‘R Us department in all Macy’s units before the 2022 holiday season. This is an odd strategy, to put it mildly – department stores have been consistently shedding their hard goods offerings over the past two decades in the face of strong competition, and this move runs counter to that trend. How many parents shopping for toys during the holiday season are going to take the time to visit a small department in a Macy’s unit? And how is the Macy’s/Toys ‘R Us combination planning to compete against Amazon and discount department stores, either on price or selection?

The co-branding that department stores have conducted with cosmetics chains such as Bluemercury and Sephora makes all the sense in the world, as their products coincide with the overall fashion focus of today’s department stores. Opening small departments of a defunct toy store chain will do little to enhance Macy’s overall image.

Perhaps Toys ‘R Us is destined to be the hydra encountered by Hercules during his twelve labors – every time a new Toys ‘R Us prototype emerges, it will be crushed by the combination of competition and the inability to provide a relevant offering for consumers.